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[2009] ZAGPPHC 354
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Marais v Galloway NO and Another (30436/09) [2009] ZAGPPHC 354 (1 December 2009)
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA (REPUBLIC OF SOUTH AFRICA)
CASE
NO: 30436/09
DATE:
1 DECEMBER 2009
In
the matter between:
MARIA
ALETTA
MARAIS Applicant
and
JAMES
GALLOWAY NO
in
his capacity as liquidator of
LEDIG
MINERALEREGTE 909JQ (PTY)
LTD First
Respondent
THE
MASTER OF THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG PROVINCIAL DIVISION, PRETORIA) Second
Respondent
JUDGMENT
1.
This is an application to convert, as
that term is used in Corrigrain Trading SA v Resora (Pty) Limited
2004 2 SA 348
W, a voluntary winding-up into a winding-up by the
court of Ledig Minerale Regte 909JQ ("the company") and for
an order
in terms of s 417 read with s 388(1) of the Companies Act,
61 of 1973 authorising an examination and enquiry into the winding-up
of the company with particular reference to the conduct of the
company's attorney, Ms Laas, to whom I shall refer as the attorney.
2.
The company passed a special resolution
on 25 August 2007. The terms of the resolution read as follows:
Daar
word besluit dat. in die lig daarvan date die Maatskappy sy doelwit
bereik het. naamlik die realisering van die minerale regte
van die
lede van die Maatskappy:
1.
dat die Maatskappy vrywillig deur die
lede gelikwideer word.
2.
die bevoegdhede van die Direkteure.
kragtens die bepalings van die Maatskappyewet, Wet 61 van 1973, sal
voortduur ten einde toe
te sien tot die uitvoering van die
ooreenkomste deur die Maatskappy gesluit en om die likwidateur in
alle opsigte ten aansien van
die afhandeling van die Maatskappy se
sake by te staan
3.
The special resolution was registered on
3 December 2007 The first respondent was appointed as the liquidator
of the company.
4.
The current situation is thus that the
company is in the process of a members' winding-up. Under s 350 of
the Companies Act. a members'
winding-up is only competent in respect
of a company which has no debts.
5.
The applicant has cited as respondents
the liquidator of the company in voluntary liquidation and the
Master, neither of who oppose
the application. However, certain of
the directors of the company gave notice of their intention to oppose
the application and.
although they did not file any papers at all.
they have appeared through counsel to contend for locus standi (which
is challenged
by the applicant) and a concomitant right to address me
on the merits.
6.
At the hearing, I asked counsel for the
directors for whom precisely he appears. Counsel informed me that he
represented Messrs
DJ Gouws. M du Plessis, G Strydom. D Spangenberg
and J Kirsten.
7.
The directors contend that they have
standing because the control of a company in voluntary liquidation
vests in its members. This
to my mind is precisely why the directors
do not have standing to oppose the setting aside of the voluntary
winding-up order. In
O'Connell Manthe
& Partners Inc v Vryheid Minerale (Edms) Bpk
1979 1 SA 553
T at 558A, the court came to the conclusion that the
directors of a company subject to an order for winding-up by the
court had
certain residual powers because, amongst other reasons,
there was "no provision like s 353 inserted in the case of a
winding
up by the Court".
8.
Section 353 of the Act in terms provides
that in a voluntary winding-up by members, all the powers of the
directors of the company
concerned shall cease except in so far as
their continuance is sanctioned by the liquidator or the company in
general meeting.
9.
Under paragraph 2 of the special
resolution, the members in general meeting purportedly conferred
powers on the directors to ensure
the proper execution of the
agreements concluded by the company and to assist the liquidator in
all aspects regarding finalisation
of the affairs of the company.
Nothing in the special resolution gives the directors power to
represent the company in litigation
during the currency and in
respect of matters falling within the ambit of the voluntary winding-
up.
10.
Counsel for the directors submitted that
the powers accorded the directors in the special resolution should be
read as being very
wide and that the specific references to the two
situations in which the directors' powers were to be preserved were
mere surplusage.
I disagree The clear language of the resolution does
not allow for the construction urged upon me by counsel.
11.
Furthermore, it seems to me. the powers
conferred on the directors are not powers conferred "in the
voluntary winding-up"
because the meeting which passed the
special resolution took place before the voluntary winding-up
commenced.
12.
Unless powers are conferred on the
directors under s 353(2)(b) of the Act by the liquidator or by the
company in general meeting
in the members' voluntary winding-up. the
effect of s 353(2) is to divest the directors of all their powers as
from the commencement
of the voluntary winding-up. The powers
purportedly conferred on the directors in the special resolution were
conferred in a meeting
which preceded the voluntary winding-up. So
the special resolution was ineffectual in confernng any powers at all
on the directors
in the voluntary winding-up Whether the terms of the
special resolution limited the exercise of powers by the liquidator
under
s 350(3) is a question I need not decide.
13
.
The claim in this application for the
winding-up of the company by the court and the claim for an enquiry
is on a different footing.
It is trite that the directors do have
residual powers to represent the company to oppose such a winding-up.
I find that in regard
to those claims, the directors are entitled to
be heard.
14.
Counsel for the directors submitted that
the company had not been cited. He suggested that the second
respondent should have been
cited as the company in liquidation
represented by the liquidator rather than, as the applicant did, as
the liquidator representing
the company There may be substance in the
point on a technical level but it is not necessary to me to decide it
because counsel
for the directors acknowledged, correctly in my view,
that in substance (if not in form) the person vested with the control
over
the liquidation, i.e. the liquidator, had received notice of the
application and had elected not to oppose it.
15.
The application is exceptionally badly
drawn. It is incoherent and prolix. I received heads of argument
drawn by the applicant's
attorney which were entirely unhelpful.
Fortunately, after I had made these views known to the attorney,
senior counsel was briefed
to argue the matter for the applicant. I
stood the matter down to enable counsel for the applicant and counsel
for the directors
to provide me with heads of argument. Counsels’
heads of argument have been most helpful.
16
.
The
applicant comes to court as both a creditor and a member of the
company. She has thus, on the papers before me. locus under
s 346(1
)(e) of the Act. The applicant has the support of 22 named members
out of the total of 33 members of the company.
17.
No affidavits have been filed in
response to the founding papers and the allegations of the applicant
stand uncontradicted. The
thrust of the application is briefly this:
17.1
Various persons held mineral rights in respect of a number of farms
in the Pilanesberg area. They did not have the know how
to turn their
rights to account.
17.2
They retained the professional services of the attorney, an attorney
of the firm LaSis Doman Inc of Pretoria, to assist them.
17.3
The allegation is that the attorney conducted herself contrary to the
duties of good faith owed by an attorney to her clients
and, by a
process of financial and administrative manipulation, the mineral
rights were disposed of to a listed company formerly
called Exaco
Holdings Limited and now called Wesiswe Platinum Limited ("Wesiswe")
in such a manner that the attorney
and her associate. Ms Karen
Venter, directly or through vehicles owned or controlled by them,
emerged with a substantial portion
of the money and shares paid by
Wesiswe to acquire the rights in question.
18.
Thus, according to the applicant:
18.1
All matters of administration regarding
the rights were left to the attorney who played a dominant role in
the affairs of the company
and overbore and stifled debate on any
suggestions conflicting with her own ideas.
18.2
The attorney and Ms Venter incorporated
a company called Our Mining Venture (Pty) Ltd ("OMV") which
apparently held the
shares in Bakubung Minerals (Pty) Ltd ("BM").
18.3
The mineral rights over certain portions
of the farm Ledig 909 J Q. belonging to some of the people who
consulted the attorney were
transferred to the company with the
intention that the company would function as the vehicle to turn
these rights to account for
the benefit of the people in question.
18.4
The mineral rights of the company were
valued by the attorney's husband, who is not a geologist and who
describes himself as an
associate valuer, in the sum of R66 million
as at 28 February 2003.
18.5
As a result of endeavours to which the
attorney was party, in October 2005 the company sold its rights to
Wesiswe for a consideration
consisting of R31.5 million to be paid in
instalments and 7 million Wesiswe shares amounting to 2% of Wesiswe’s
issued share
capital at that stage.
18.6
In its pre-listing statement, Wesiswe described OMV as one of the
"vendors" from whom Wesiswe acquired the rights.
18.7
During the course of the deliberations of the members of the company
prior to the conclusion of the transaction with Wesiswe,
the attorney
admitted that she had interests in the transaction which conflicted
with her duty to her clients but asserted that
this conflict of
interest caused no prejudice to any of the parties.
18.8
BM acquired an interest in the mineral rights in the portions of the
farm Ledig 909 J.Q. which it sold to Wesiswe for R10 million.
In
addition the attorney and her associate (through a trust) received
200 000 shares in Wesiswe and Wesiswe lent BM R58,5 million
without
fixed repayment terms for what Wesiswe described as "exploration
activities"
19.
As far as the applicant's claim is concerned, the following:
19.1
The applicant had a claim against the
company for commission in the sum of R1,126 million. In his heads of
argument, counsel for
the applicant submitted that it is at this
stage unclear whether any portion has been paid.
19.2
The voluntary winding-up was obtained on
the strength of affidavits by the directors of the company in which
they said that at the
time they applied for the voluntary winding-up
August 2007, the company had no debts.
19.3
The applicant sought to persuade the
Master to admit her claim at a meeting called under the provisions of
s 386 of the Act In heads
of argument dated 28 November 2008
submitted to the Master by the attorney purporting to act on behalf
of the members of the company,
the attorney submitted that in fact
the applicant's claim had been settled in the sum of R675 000 and
paid, thereby extinguishing
her claim.
19
.
4
The applicant denies the settlement and says that she accepted the
cheque as tendered on account and under protest.
19.5
The applicant would thus appear to be a
creditor of the company for at least R451 000.
20.
On the papers before me. the allegation
by the directors that the company was free of debt at the date of its
voluntary winding-up
was thus a material misrepresentation.
21.
Furthermore, according to the applicant,
an analysis of the ledger account of the company obtained from the
attorney revealed substantial
payments into and out of the company
which have never been explained
22.
I conclude that the present members
voluntary winding-up cannot be allowed to continue because one of the
prerequisites for that
situation, that the company sought to be
placed under members' voluntary winding-up has no debts was. at the
time the voluntary
winding-up commenced, not present.
23.
The inference appears to be inescapable
that the directors have allowed themselves to be manipulated by the
attorney, to the detriment
of the company.
24.
The applicant's claim aside, it seems to me that the difference
between the powers accorded the liquidator in this members'
voluntary
winding-up as opposed to those vested in a liquidator appointed in a
winding-up by the court must be decisive in regard
to the exercise of
the discretion conferred upon me by s 354(1) of the Act Under s
350(3) of the Act, the liquidator in a members'
voluntary winding-up
such as the present must exercise the powers conferred on a
liquidator by the Act subject to such directions
as may be given by
the company in general meeting, ie by the members A liquidator
appointed pursuant to a winding-up by the court
must, under s 387,
merely have regard to any directions given by creditors and members
or contributories Furthermore, in the present
voluntary winding-up
the directors are. because of the terms of the special resolution,
vested with certain powers which, to say
the least, are inappropriate
in the circumstances disclosed on the papers.
25.
There is in my view a strong possibility, if not a likelihood, that
substantial injustices could be caused if a majority of
members or of
directors is persuaded, in the continuation of the voluntary
winding-up, to approve, or not to approve, a particular
course of
action.
26.
Counsel for the directors submitted that I should not grant final
relief in relation to the attack on the continuation of the
voluntary
winding-up. I disagree. All the parties who should have had notice of
the claim for this relief have received notice.
No interested party
has sought to intervene, despite the lengthy period between the
launching of the application and its hearing
before me.
27.
The directors urge me, through their
counsel's heads of argument, to believe that they have not filed
papers in this application
because the applicant had chosen
procedurally to attack the notice of intention to oppose under the
provisions of Rule 30. The
applicant delivered a notice under Rule
30(2){b) on 14 July 2009 requesting that the perceived irregularity
in relation to the
notice of intention to oppose be corrected by the
withdrawal of the notice. Under Rule 30(2) an application to set
aside an irregular
step may be made "only if' the application is
delivered within 15 days after the expiry of the ten day period
mentioned in
the notice affording his opponent an opportunity to
remove the cause of complaint.
28
.
As no application to set aside the
alleged irregular step was ever made, the notice of intention to
oppose stood, for what it was
worth. This must have been made known
to the directors. I find that the directors had no basis upon which
to delay filing papers
in opposition to the relief sought with or
without an appropriate application for leave to intervene. There is
thus no basis for
a rule rather than final relief in relation to the
claim to set aside the voluntary winding-up.
29.
Although it would be open to me to grant
an order for the winding-up of the company by the court without
setting aside the voluntary
winding-up. I have decided in the
exercise of my discretion that it would be appropriate to set the
voluntary winding up aside
Section 354 makes reference to the
"continuance of any voluntary winding-up" and it seems to
me proper for me to make
clear that the voluntary winding-up should
not continue at all.
30.
I shall therefore come to the relief of
the applicant pursuant to her claim for the voluntary winding-up to
be set aside.
31.
In my view the applicant has made out a
case for a winding-up under s 344(h) of the Act, that it is just and
equitable that the
company should be wound up. This case in my view
is distinguishable from the situations considered in Rand Air (Pty)
Ltd v Rat
Bester Investments (Pty) Ltd
1985 2 SA 345
W. In Rand Air,
the issue was whether the respondent company should be wound up. In
this case the issue is not whether but under
which statutory regime
the company should be wound up.
32.
In order to cater for interested parties
who have not as yet had their say on the issue of the v/inding-up by
the court. I have
decided in the exercise of my discretion to grant a
provisional winding up order with an extended return day and
directions for
appropriate publication.
33.
I decline to grant relief in relation to
the prayer for an enquiry under s 417 of the Act These are my
reasons:
33.1.
The relief sought is predicated upon the
continuation of the voluntary winding-up. which I propose to set
aside.
33.2
Such an enquiry can only competently be
ordered under s 417 in relation to a company which is unable to pay
its debts. That has
not been shown to be the case
33.3
The request for an enquiry is thus
premature. It may be renewed in due course if a proper basis can be
established.
34.
Finally, I record for the sake of
clarity that I would have exercised my discretion in regard to costs
(subject to correction or
variation on the return day in general and
with particular reference to the shortcomings in relation to the
presentation of the
applicant’s case before counsel was
briefed, which I described above) to award costs to the applicant in
respect of the entire
application, ie not merely that portion
relating to the prayer for winding-up by the court.
35.
I make the following order:
35.1.
The winding-up proceedings in Ledig
Minerale Regte 909 J.Q. (Pty) Limited (in voluntary liquidation)
under Master's reference number
T2729/2007 are hereby set aside.
35.2.
A provisional winding-up order will
issue calling upon Ledig Minerale Regte 909 J.Q. (Pty) Limited and
all other interested parties
to show cause on 8 March 2010. at 10h00
or so soon thereafter as the matter may be heard, why:
35.2.1.
the provisional winding-up order should
not be made final; and
35.2.2.
the applicant’s costs in respect
of the entire application, taxed on the basis that the employment of
senior counsel was justified,
should not be made costs in the
liquidation subject to what follows below; in determining the quantum
of the costs to be awarded
to the applicant, the taxing master should
not disallow two thirds of all the costs related to the preparation
of the applicant's
founding affidavit.
35.2.3.
The provisional winding-up order must be served on Ledig Minerale
Regte 909 J Q. (Pty) Limited at its registered office
and published
once in the Beeld newspaper,
35.3
The claim for an order for an enquiry under s 417 of the Companies
Act, 1973 is refused
NB
TUCHTEFI
ACTING
JUDGE OF THE HIGH COURT
1
DECEMBER 2009